§ First, expenditure at home. The Government intend to slow down the rate of expenditure on capital projects and to defer as far as possible purchases of equipment and stores by Government Departments, Local Authorities and nationalised industries.
1184§ Housing, schools and hospitals will be contained within their existing programmes. For other non-industrial capital projects for which contracts have not yet been signed, the starting dates will be postponed for six months. Exemptions will be made for projects in development districts and areas of high unemployment.
§ Similarly, purchases of goods will be deferred to the maximum possible extent.
§ All Government Departments have been instructed to carry out this policy and to arrange for other bodies for which they are responsible to do likewise. The nationalised industries will be called on to follow a similar course of action. Local authorities will be asked to follow suit.
§ Loan sanction and grants will only be given to local authority projects which are urgently required. In particular, sanction will not be given except in special circumstances to loans for expenditure on land purchases in advance of requirements, on civic buildings, offices and a variety of miscellaneous projects which, though desirable in themselves, are not essential at this time. The expenditure in these categories is now running at £150 million a year.
§ Lending by local authorities on mortgage for house purchase has trebled in England and Wales in the last five years, and in 1964– 65 reached £180 million. With the co-operation of the local authorities this will be restricted to the average of the three years ended 31st March, 1965, namely £130 million.
§ Since the beginning of the financial year drawings by local authorities on the Public Works Loan Board have been exceptionally heavy. In present circumstances a more regular phasing of issues is necessary, and I have asked the Public Works Loan Commissioners to arrange this forthwith.
§ The Government, in addition to reviewing their own establishments, are asking the local authorities to review their present establishments; and in the light of this to confine net increases in their staffs to very urgent services, where essential professional workers, e.g. teachers, arc required.
1185§ The House will recall that last Spring I undertook to review the swollen programmes of public expenditure left behind by our predecessors. This review is now complete. As I forecast before the Election, the examination revealed that it would not be possible to carry out all the programmes we inherited within the limits of our resources until the necessary rate of growth of production has been achieved. We have accordingly reshaped the total programme and I can inform the House that from now on expenditure will be kept to the level that we as a nation can afford. I am giving instructions to Departments that the 1966–67 Estimates shall be drawn up within a limit which has been determined for each Department within the agreed total.
§ As regards Defence, good progress is being made with the review designed to reduce the forward defence programme by some £400 million by 1969–70 and to achieve a large cut in that part which falls on the balance of payments. Next year's programme is being reduced by about £100 million. As to other overseas expenditure, all Departments and public authorities are to observe the most stringent economy in overseas expenditure and do all they can to increase overseas receipts.
§ So much for cuts in existing expenditure. We shall also have to defer some of the desirable social reforms we had hoped to do in the immediate future. While priority must go to wage-related unemployment and sickness benefits, the Government have decided that it will not be possible to introduce an income guarantee scheme or remove the remaining National Health Service charges in the next Session. We have also decided to postpone the introduction of the scheme of specially favourable interest rates for owner-occupiers.